Speaker 1: Hello and welcome to our web chat interview with Steve Pulley who's Global Managing Director of OrgID at Thomson Reuters, one of the leading players in third party services for KYC and other similar areas. Steve, the need for KYC is just booming and corporate treasurers throughout the world are more and more being demanded by their banks and other suppliers to provide

Speaker 2: their KYC information. What are you seeing? It's a great question Jack. So post 9-11, post financial crisis, what we're seeing is a much more stringent environment the banks are creating around know your customer, around anti-money laundering, around trying to isolate and weed out terrorist financing that's being accompanied by increased personal liability for senior bank executives and considerable, oftentimes multi-billion dollar fines for non-compliance in these areas. So we're seeing the financial services industry really invest quite heavily in upgrading their policies, their procedures, their control frameworks as a preventative measure in this area and the knock-on effect of that has been increased burden on corporate treasuries to provide information to satisfy their needs around source of wealth, source of funds, who the ultimate beneficial owners are and oftentimes we find that that's not a consistent approach that's being taken by the banks. But that's

Speaker 1: the backdrop. But that's a major problem, this inconsistent approach. There is very big differences between the banks and different service companies, the way they treat KYC and what they demand. Where is Thomson Reuters fitting? Because there needs to be some commonality

Speaker 2: here because it's horrendous at the moment. So Thomson Reuters has invested considerable time working with the chief compliance officers of 23 different banking institutions around the world to actually broker a common industry standard. It's a standard that varies by jurisdiction because the regulatory requirements in Hong Kong are different to those in say, Frankfurt. But nonetheless, it's a common industry standard which has actually started to take on widespread adoption across both buy and sell side. So are you replacing ISO? No, we're not looking to create new standards or replace existing standards in that sense. But what we are doing is creating a common approach to the information that's required in these different jurisdictions for different legal entity types. The advantage being for the corporate treasury, that they can provide their information once and it'd be accurate and up to date for all of their banking counterparties, as opposed to having to continually refresh or provide additional information from one firm versus another. Yeah, but that's what you do as a

Speaker 1: third party supplier. But will the requirements by the SWIFT, KYC and the other major players be

Speaker 2: different? We anticipate similarities in policy standards. You know, that was a comment on competitors, some of them focus on specific segments of the market, such as correspondent banks, which may be less relevant to your constituencies tuning in for this edition. But generally speaking, the industry is moving towards a common standard. I think what we do that differentiates the Thomson Reuters service is we provide enhanced levels of service to the banks around screening and monitoring the status of their client entities. We have a 160 plus year history in the news and media business, and we leverage those news sources to monitor changes in status around the legal entities, banking customers are partnering and banking, whether that be around delistings, deregulations, other corporate actions, additions to the board, subtractions from the board, politically exposed people on the board, etc. And that's really what differentiates our service versus the other firms in the market. So your demands for information

Speaker 1: are roughly similar. It's the supporting the database behind the information is where you

Speaker 2: think you differentiate. Correct. I think for the banks, that's a large differentiator. Again, that's behind the scenes work that doesn't impact the life of the corporate treasurer, but provides ongoing assurance to the banks that the firm they thought they were dealing with hasn't changed in some significant manner that they need to be aware of. I think the other thing I'd say is for the corporate treasurers, the approach that we've taken so far, and the way that we've designed the portal through which they can engage their banking counterparties, we've really tried to model ourselves on the internet age LinkedIn style business model of, you know, build your own profile, maintain your own profile, stay in control of your information yourselves. It's not just a document exchange like others in the marketplace have put together, it really is a more sophisticated way of of permissioning and sharing information with your banking counterparties. So if I was,

Speaker 1: I don't know, large multinational, I would only have to put it in once. Don't I have to put it the information into the other players, the KYC players?

Speaker 2: It's a really great question, Jack. I think if you go back two years ago, that was the fear. You know, two years ago, you talked to the banks, and they felt like they had to pick whoever they thought was going to be the ultimate long term winner in the KYC third party space. If you talk to the big corporates or the big fund managers, they'd have said the same thing. I only want to put my documents in the utility or managed service, which we think is going to gain mass adoption. The reality is the magnitude of the KYC problem for the banks is so significant that they've resolved that they're likely to end up working with more than one provider in this space. And the power actually lies with the corporate. So the corporates can choose where they put their information and direct their banks there, because it's still considerably less painful than the bank having to collect information directly, or the corporate having to respond on multiple occasions. So the dynamic in the marketplace today is one where the buy side, the corporates and the funds actually have the power and can select where they put their information based on who they feel comfortable doing business with from a data privacy,

Speaker 1: information security perspective. So that fear of having to do multiple supply has gone away. But how do we, we the corporates, be sure we're choosing the right one? What are the differentiators between the different services? Because there are clearly great differentiators. Some people have onboarding of customers come down. What are,

Speaker 2: for you, the key differences? Yes, so Thomson Reuters takes a holistic approach to client onboarding when we're not just in the business of KYC. Whilst we've grown up out of the ANL space, with prior acquisitions in businesses like WorldCheck, which is the world's leading source of information around sanctions listed entities, individuals, politically exposed persons. Yeah, that's our heritage. We've segued from there and we provide our financial services clients with global client onboarding workflow tools. So a large number of firms around the world are using our software and services, not just our data for the process of client onboarding. And we feel that we're solving a much bigger business problem for our clients, one that's got long-term sustainability. KYC is just the tip of the iceberg,

Speaker 1: but there's a pain point for the back end. So the issue then that any corporate treasurers need to look at is the onboarding of clients and suppliers in a way that manages it for them.

Speaker 2: I think that's part of it. I think they've got to feel comfortable with the brand that they're working with and doing business with. I think they've got to feel comfortable that the banks who are their primary partners are comfortable with the service provider, either on and using the service provider or very open-minded to the service provider. I think there's a functionality element there in terms of what they can actually do in terms of additional information they can provide to their banking customers, as well as getting through the usual hoops around, can you convince me that my information is secure? I mean, the benchmark is pretty low to be fair, because at the moment it's a relationship manager coming around taking physical documents away, which sometimes get misplaced or lost or not retrieved, or it's through emails, which is not exactly the most secure and robust medium for information transfer. But I think they're probably the criteria that corporates will be

Speaker 1: looking at this with. Okay. And then in terms of the KYC business, most of it at the moment is, as far as you're concerned, is dealing with the banks and helping them solve their KYC problem, but corporates have a KYC problem of their own with their own buyers, their own suppliers. Where do you fit in that scenario? How can they use you? So on the first piece, just to put some

Speaker 2: numbers around it, we've published around 7,000 KYC profiles this year. That's 7,000 corporates that are uploaded into our system, that have got comfortable, done their KYC due diligence on us, done their information security diligence on us, provided their information, and that's being passed on to their banking counterparties. And they're now in control of that as corporates,

Speaker 1: ala you and I would be with our LinkedIn profiles. So can your bank go to Thomson Reuters

Speaker 2: for my KYC information? Correct, because it's already there, and it's already been done. So go there, please. And that's genuinely happening now on quite a large scale. And the brand names that we have in there is the who's who, from the Fortune 500 in the US, the FTSE 100 here, and all of the major technology and other industry players that you would think of in that 7,000. So that's kind of our platform that we're building from, specifically on the supplier space. We see that as a real pain point for the corporates, both the activity of onboarding suppliers, the activity of paying suppliers, sourcing invoice discounting or factoring solutions for financing the working capital within the business. KYC and knowing who the supplier is, or KYC-ing the supplier, shall we say, is just one piece of this. So there's a number of platforms out there who've built supplier onboarding workflow, selling software into a large corporate to manage that process. We view ourselves as a supplier of content and a supplier of solutions into those onboarding workflow platforms. We're not trying to create yet another supplier onboarding platform. What we are trying to do, though, is plug in and provide the screening solutions and the content to the databases, so the corporates can look against those and feel comfortable they understand who their supplier is, whether that be around anti-money laundering, whether that be around sanctions issues. But increasingly, we're extending into new areas such as child or slave labour, other human rights related issues, and other environmental factors, in fact, which are increasingly having an implication on whether a corporate's prepared to do business with that supplier or not. And does that mean that I can

Speaker 1: plug my treasury management system into that information so I can approve payments without

Speaker 2: having to go off and do secondary work? I think that's the future. I don't think there's anybody out there today that's offering that level of integration. Certainly, you know, the type of solutions that we're providing around Know Your Supplier relate to the onboarding and then the ongoing periodic check of that supplier. So we ourselves, we work with 39,000 suppliers around the world as Thomson Reuters, and we have a standard program in place for doing due diligence on each and every one of those to ensure they comply with certain standards for us to be comfortable engaging them and ultimately paying them. Most corporates have got some sort of similar program in place, but again, that's very much at the time of onboarding and then annually, or perhaps every three years, there'll be a refresh to make sure that nothing's changed. So we're certainly helping facilitate that workflow. I think, as I say, the future is going to be going one step further into the payment process for screening checks. And that, I think, is where the AML and counter-terrorist financing piece really ought to come in, because that's the primary block for whether you should or shouldn't be making that payment.

Speaker 1: Yes, the corporate treasurers will tell many stories of different problems in different parts of the world trying to make or receive payments. So what would be the other piece of the future? What is the other major development coming through on the KOMC

Speaker 2: anti-money laundering area? I think it's just extension. You know, these managed service and utility models are really starting to gain traction. But if you think of them in terms of wallet share, so what proportion of global KYC are they doing? Whilst we feel that Thomson Reuters has really stepped out into an early lead, it's still a small portion of the overall KYC activity that's conducted. I think the situation the banks are in, many of whom with sub-cost of capital return on equity, is having to increasingly turn to managed services, utility options or other forms of cost mutualisation to rip cost out of their business, drive efficiencies and improve profitability. So we see more of that. So I expect to see that going pan-geography. So not just UK and US, which is where it really originated. We are global. We've done KYC records on entities in 60 different jurisdictions in over 25 languages. But I think we'll see our competitors starting to step up across geography as well. I think we expect to see it spanning down into business banking and potentially ultimately high net worth and perhaps retail as well. That's just on the KYC dimension. Layer on top of that, all of this spate of regulations that are coming down the tracks, whether it be Dodd-Frank, EMEA, MIFID, all of these obligations for collecting identifiers or other bits of information that relate to these specific regs. We see KYC just as the tip of the iceberg. These KYC profiles are going to be built out with all of this additional information that's required so that ultimately the corporate treasurer is touched as few times as possible or as is necessary by their banks. That's really

Speaker 1: interesting, Steve. Most interesting. I'm sure our viewers will look forward to reading this. Thank you. I appreciate your time.